allegations by some Staples Holdings Ltd. shareholders that it mismanaged the buyout of Chips Ltd.

"We don't have any comment about the story,'' a bank spokeswoman said.

More than 290 holders of preferred shares in Staples Holdings Ltd. have been told they will lose the $5 million they invested in the company in 1995.

The board of directors is attempting to sell off the operating entities office supplier Staples Ltd. and medical supplier Atlantic Medical, staunching the flow of funds out of the companies to pay off $1.3 million in bank debt and $588,316 in annual dividends.

In a previous Royal Gazette story Staples chairman Bill Midon blamed the loss of two key executives, who started up a competitor four months after the purchase, as a major factor in the consolidated company's loss of revenue.

The Bank of Bermuda made the original loan of $2 million to Staples to top up the $5 million contributed by preference shareholders in the $7 million purchase of Chips.

By his calculations Staples Holdings currently has a $2 million book value, enough to pay off the Bank of Bermuda, which acted as negotiator and advisor in the Chips purchase.

Shareholders have questioned whether the Bank of Bermuda had a conflict of interest in acting a negotiator for the deal, being involved in issuing the initial public offering, and loaning $2 million to the company.

The shareholders, who didn't want to be named, asked how the bank could have negotiated a non-competitive clause with only the principal Bill Gresham and not ensured any other management was involved.

After the story was published this week another shareholder who didn't want to be identified phoned this newspaper to ask how to obtain a list of shareholders names to get a group together and consider some sort of class action against the board of directors.

The share register is kept by the Bank of Bermuda and can be viewed by any member of the public on request.

Yesterday Staples held a staff meeting to explain to the 55 employees that the operating entities were not at risk of failing. It was the holding company that was not viable because of debts.